Central Depository Services Limited (CDSL) and National Securities Depository Limited (NSDL) both are central depositories in India that have been providing various digital solutions for investors in order to strengthen digital footprints in the economy. They provide their Demat services through registered Depository Participants (DP).
CDSL has become the first depository to reach three crores (30 million) Demat accounts (Excluding closed accounts). CDSL has announced that they have a family of more than three crores active investors and it took only a year to add new one crore Demat accounts. In Jan 2020, it was at the two-crore mark.
Let us discuss Demat and trading account’s functions and advantages one by one.
What is Demat Account
A dematerialization account is an account that holds the financial securities of an investor digitally. In other words, it is an account that keeps the shares in digital or electronic form. It is mandatory to open a Demat account by an investor in order to buy and sell securities in the stock markets.
Role of Demat Account:
- Making share transfers speedy, simpler and efficient
- Eradicates the risk of forgeries and theft
- Makes monitoring and tracing of securities easy for investors
- Establishes a record of every transfer and transaction
Advantages of Demat account
1. Easy Holding
Investors can hold their securities in the most convenient form i.e. electronic form so that there is no fear of loss or misplacing the share certificates. Just be free from any worry of theft, or damage by using a Demat account.
2. Expedite Transfers
The physical form of shares was very time-consuming to transfer. Electronic transfers are fast and convenient.
3. Low-cost transfers
There is no stamp duty on the transfer of shares electronically. Share transfer stamps were necessary for Physical share transfers. Demat account has eliminated this burden of expense on investors.
4. Reduced documentation
Investors can open a Demat account online. They need to upload their documents in electronic form only. You need not submit documents in paper form in any office. It saves a lot of time. Investors can open multiple Demat accounts using their PAN card.
5. No odd limit
Using Demat accounts, investors can buy/sell even a single share. Earlier, odd lots were not allowed to investors.
A trading account is required to make transactions for buying or selling financial securities in the stock markets. Earlier, investors had to be present physically at a stock exchange to make a transaction, as it was an open outcry system and they had to pass a verbal communication to finalize their buying/selling. But now everything is online in share trading
Investors can open a trading account along with a Demat account to perform online transactions.
Role of Trading Account
1. One-point Access for multiple exchanges.
You can trade in different financial securities and commodities using one platform. You need not log in to different trading accounts to deal with different financial securities.
2. Reliable information
Successful investing and trading in the stock market depends on informed decisions. And investors and traders are required to have reliable information to make informed decisions. Using a trading account, you can get valuable services like research reports.
3. Seamless Transactions
Online trading accounts enable trading very seamlessly as it uses advanced technology to conduct transactions. Make transactions to invest easily.
You can operate your trading account on different electronic devices like smartphones, laptops, tabs. No matter where you are. Just trade whenever you see an opportunity to make money in the stock market.
The Bottom Line
That’s all about what is Demat account, multiple Demat accounts, trading accounts. Take the advantage of depository’s services and empower yourself as the Atma-nirbhar Niveshak through digital services.